Read about everything you need to know about Central Asia Oil Reserves: Challenges and Opportunities
Oil primarily referred to as ‘liquid gold’ is of utmost importance to every country of the world, both oil importers and oil exporters and the people in general. Oil, apart from being a full valuable resource, serves as a gateway of foreign exchange. This resource, in its abundance, has invited major power interventions, corruption in the political sphere, foreign debt, militarization, power struggle within the respective countries and which has a spill-over effect on the national economies of the oil owning countries, which has in turn generated local, regional and global power game. Oil and politics are inter-connected with each which was responsible for changes in the political equations in numerous countries and thereby enabling the local structures to suppress traditional power structures. This article will highlight the power game with reference to oil in emerging Central Asian political domain.
In this article
- The New Power Game Centre
- The Pipeline Agenda
- Russia: Gateway of Cooperation
- The US: A Binding Factor
- China: A Boon or Bane for the Central Asian Interests
- India: An Emerging New Area of Interest
- The Countries of Central Asian Republics and Oil Power Syndrome
- Energy: The Fillet of Contention
- Terrorism and Energy
The New Power Game Centre
The sudden downfall of erstwhile Soviet Union led to an intense conflict over control of vast energy resources particularly of oil and the natural gas deposits of the newly independent states of Caucasus and Central Asia. This emerged as the focus of tension in Central Asia that added a new chapter in the ‘Great Game’ of control over Eurasia.
The Pipeline Agenda
The pipelines have remained a major link between Azerbaijan, Russia and Kazakhstan. This was due to the fact that the pipeline routes for oil from Azerbaijan and Kazakhstan ran through Russia to the port of Novorossiysk in the Black Sea, which gave Moscow a chance to be advantageous in the pipeline section. Though Moscow at the very outset restricted the amount of oil to be transported through its pipelines and imposed a series of tariffs, it later became a member of the Caspian Pipeline Consortium (CPC) that was to build a $2 billion pipeline from Kazakhstan to Novorossiysk. As against this background, the northern route was favoured by Russia since that would connect Kazakhstan to the Russian network thereby giving the latter a chance to dominate the pipeline area for its passage through Chechnya. The western route was not taken seriously for it being a costly affair and instead Greece, Bulgaria and Russia, proposed a pipeline linking the Bulgarian port of Burgas with Alexandrapolis, the Greek port bypassing the Straits and the Turkish territory. The eastern and south-eastern routes had met with the same fate like the western route which called for the southern route as the most economical and valuable option for both Iran and the Gulf.
To sum up, it can be said that these pipelines served as the basic choke points of relations either trust or hatred between the countries of Central Asia.
In order to have a sound understanding of the oil politics in Central Asia, it will be essential to highlight a thorough analysis of the influence of countries that played a major role. Among the countries US, Russia, China and India have greatly fueled the politics of oil in Central Asia currently to a great extent.
Russia: Gateway of Cooperation
Russia had a major role in the Central Asian oil and gas infrastructure since all the pipelines, transport and communication network were integrally connected with Russia. The soviet pipelines were used by the western companies like Chevron to reduce the cost of new infrastructure.
According to the ongoing trends during that period, Turkmenistan found a strong support in Russia which became visible after it joined hands with Blue Stream, a Russian pipeline under the Black sea for transferring gas to turkey after it had deviated itself from Shell and PSG joint initiative of transporting Turkmen gas to Turkey through a non-Russian route.
Russian movement towards the east proved to be a helping hand for Western Siberia whose crude oil production was gradually on a decrease (333mt in 2008 to 303mt by 2030). Moscow wanted to capture along with India new market opportunities having the global energy demand that later shifted to the Asia- Pacific region. Russia despite all such efforts sought to create an Asian card or adopt a policy which signified a change in direction a little away from the West and relying upon the European Union (EU) nations.
The US: A Binding Factor
The US has been a major investor in the Caspian Sea region owing to the fact that the countries of this region have inadequate technology and capital to develop oil fields which in turn gives it an opportunity to mend its relations with both Azerbaijan and Kazakhstan. Besides the above the US had played an important role in bringing together Georgia, Azerbaijan and Turkey for building up the new pipeline project called the BTC pipeline.
The US has a basic interest in promoting the flow of oil and natural gas to Europe and Asia that has sought to limit the Russian influence over the oil and natural gas supplies from Central Asia. Despite knowing about India’s urgent need for natural gas, Washington opposed the Iran-Pakistan-India and Myanmar-India gas pipeline to isolate Iran and Myanmar. Central Asia and Caspian might be the areas rich in energy resources, which too faced similar problems concerning the transit, development and infrastructure of oil and natural gas reserves.
The entry of the German forces has paved the way for unstable relations within the Caspian region which has been accompanied with the various natural calamities and exploitation of natural resources that has led to a decrease in non-resource exports through rise in the value of national currency along with increasing imports and decreasing productivity.
China: A Boon or Bane for the Central Asian Interests
One of the important agenda of China in the post- Cold War years remains the energy procurement and preservation, on account of its heavy domestic demand. As a result, China has expanded its wings, starting from South Asia to Latin America. So, its current involvement in the Central Asia has not been an isolated matter. China, the world’s second largest importer, has been importing pipeline or liquefied natural gas for transforming its own economy.
China shares a strategic inclination with Central Asia that gets reflected in the maritime imports of oil and gas with the former’s efforts to invest in the Central Asian pipelines. In other words, China shares a supply-oriented whereas with Central Asia it has an equity based relationship.
India: An Emerging New Area of Interest
Like China, India is also actively involved in oil politics of Central Asia. Both China and India are expected to occupy 50% of total world energy demand growth, 60% of world oil demand growth, 20% of natural gas and 85% of coal demand growth. India wanted the construction of pipelines that became clear in its support for pipelines along with 6 countries passing through Afghanistan, Pakistan, Bangladesh, Iran, Myanmar and Turkmenistan. India’s primary energy demand is expected to grow at 6% with the GDP grows at 7-8%. According to the international energy agency (IEA) reports $10 rise in crude prices would reduce India’s GDP by 1 % which calls for the diversification of energy sources for ensuring the availability of energy at affordable rates.
India has been one of the one of the first areas to develop its strategic connections with Central Asia. This was evident in June 2012, after New Delhi strengthened its bilateral understanding with the region through the Connect Central Asia policy besides proposing to set up India’s engagement in the Shanghai Cooperation Organization (SCO) and new Comprehensive
Economic Cooperation Agreement for integration of its markets with Central Asia. According to the estimates, about 3 quarters of India’s oil come from the Middle East. Central Asia is the home to 3% oil and 4% natural gas reserves both on and offshore fields respectively. India’s engagement with Central Asia started after the India’s state owned Oil and Natural Gas ‘Corporation (ONGC) sought to invest in Kazakhstan having the world’s richest oilfields. Indian efforts were also noticed in the construction of the Turkmenistan, Afghanistan, Pakistan,
India (TAPI) pipeline estimated to cost around US$ 7.6 billion for transferring 30 bcm of gas from the natural gas fields of Turkmenistan via Afghanistan and Pakistan to India which suffered a breakdown for the security risks with the pipeline running through southern Afghanistan.
The Countries of Central Asian Republics and Oil Power Syndrome
Kazakhstan: Kazakhstan has 5 major onshore fields namely Tengiz, Karachagazak, Aktobe, Mangistau, Uzen as well as 2 offshore fields Kashagan and Kurumangazy that have 14 billion barrels of its oil and natural gas reserves. Central Asia entered into a multilateral treaties with Russia which was evident when the Russian President proposed a single export channel for gas exports suggesting Russia, Kazakhstan, Turkmenistan and Uzbekistan form the Eurasian Gas Producers Alliance that got its approval in 2003 and through which Russia and all the other countries sold gas at market prices. In 2001 Russia and Kazakhstan signed an agreement on energy: sector cooperation that refers to Gazprom’s agreement of $140 billion for Kazakhstan’s gas imports giving the latter 50% stake in Orenberg gas processing plant. At present the country produces 65 million tonnes (mt) of oil per year that would increase to 120-130mt per year by Gas production was to reach 106.1 billion cubic metres (bcm) by 2015 with domestic consumption of 31.2bcm by 2015.13
Uzbekistan: Uzbekistan has about 600 million barrels of oil and 39.7 trillion cubic feet (tcf) of proven gas reserves as recorded in 2012. It is one of the 15 natural gas producers of the world with it being the 3rd largest natural gas producer in the Commonwealth of Independent States (CIS).
Turkmenistan: Turkmenistan has oil reserves of about 600 million barrels and less than 1/10th of world’s reserves. This country along with Russia and Kazakhstan has agreed upon a new pipeline carrying 353 bcf of Turkmen and 353 bcf of Kazakbstan’s gas reserves to Russia. It was in January 2014 that the Intergovernmental Turkmen Iranian joint Commission on economic cooperation was signed on oil and natural gas cooperation for accentuating Turkmen supplies and developing cordial relation with the other Central Asian republics. The series of pipelines in Turkmenistan are mainly located towards Russia. The exports range from Russia to Ukraine in the north- west, EU in the west, Iran in the south, China in the East and India and Pakistan in the southeast. With all 1 its efforts the natural gas productions are expected to rise up to 230bcm by 2020.
Azerbaijan: Azerbaijan, taken to be an outpost to the Central Asian area by the Soviet Union has been important for the construction of the South European Corridor located in the Shah Deniz 2 field. Oil exports comprising 85% of the country’s exports and 75% of the governmental budget had been used for raising the living standards of the people.
Energy: The Fillet of Contention
The five central Asian republics of Kazakhstan, Turkmenistan, Uzbekistan, Kyrgyzstan and Tajikistan after 15 years of independence have been in the process of transformation from a Soviet plane to a market economy and from totalitarianism to guided democracy. In the post 9/11 era, during the war against terror Uzbekistan and Kyrgyzstan received troops from USA and Germany stationing around 300 soldiers in Termez in southern Uzbekistan. Germany is the only EU country to get represented in all the Central Asian republics which all harped on the basic notion of political stability through rule of law, pluralism, social market and economy.
Energy has come to be one of the biggest instruments for geopolitical competition in the 21st century with the goals like national security and control over resources of territories. Russia and china both have been utilizers of energy transforming themselves for a better grasp of their foreign policy objectives. Both these countries share a straightforward relationship regarding energy where the Russian leaders selected the option of turning east by redirecting oil flows to china thereby threatening energy security in the region and aiming towards a strategic rapprochement between Beijing and Moscow.
Russia tried its best to prevent the central Asian markets from collaborating with its western counterparts in Europe since it considered that exports of oil through any other route apart from Russia shall compete against Russian gas in the European market. Efforts for building up a southern corridor connecting Caspian directly to the EU were inculcated including interconnections between Turkey, Greece, Italy (ITGI), Trans-Adriatic pipeline (TAP) and Nabucco as well as negotiations on gas and transport sales with Central and East European customers were agreed with. The EU had established successful relationships with the Central Asian states via the Trans-
Caspian pipeline. The TAPI pipeline (Turkmenistan, Afghanistan, Pakistan and India) stretching over 2000kms from Dauletabad to India passing through Afghanistan’s Helmand and Kandahar provinces started in 25 April 2008 had the sea concerns greatly affecting the area.
Terrorism and Energy
Terrorism has been a major issue in Central Asian politics post the 9/11 incident, that provoked the Bush regime to seek assistance from the 5 Central Asian republics for its crusade against terrorism. Central Asia, one of the major regions embracing Islam, has been a conflict zone for its location closer to Afghanistan. The oil and gas rich companies have been greatly affected by the terroristic activities as the latter have been attempting to curb the former’s reserves. Afghanistan owing to its central position has been the transit route for the natural gas pipelines. Elder Bush’s efforts of the Desert Storm have been to capture the Rumaica oil field of southern Iraq which was a passage for India, Iran, Russia and Israel for supplying oil and natural gas to the South and Southeast Asia since it was continuously being threatened by Taliban. Illegal efforts of the Taliban have been recently highlighted by the Russian President Vladimir
Putin at the G-20 Summit, where he threw light upon the millions made out of the sale of crude oil ($1.5 million) along with control 10 oilfields in Iraq and Syria. All the above attempts have in a way consolidated India along with Russia, Iran, Kazakhstan, Uzbekistan, Tajikistan, and Turkmenistan to make joint efforts in their fight against terrorism.
Summarily then, it can be said that oil has been a major source of income for the Central Asian region, especially after the balkanization of former Soviet Union in 1991. Though the region had experienced a vast number of problems owing to oil and energy resources, it has been accompanied with transnational problems and thereby forcing the region search for a new identity. The recent BRICS meeting saw the countries of Brazil, Russia, India, China and South Africa come together for building up strategies on issues with terrorism topping the list.
Indian Prime Minister Narendra Modi has called putting an end to the supply of arms and explosives to the terrorist groups thereby creating an international legal regime to deal with this issue. Like India, all the other countries shall take serious measures to deal with the terroristic activities that would only lead to a proper distribution and protection of the world’s major resources. A number of efforts have been initiated towards the reconstruction of new states that has not only given the Central Asian republics a scope for rejuvenation but also provoked them to have suitable relations with the other adjacent countries. Both Central Asia and West Asia have been huge deposits of oil and energy, but the present scenario shows a lack of pragmatism in the Central Asian countries which has given a space for the emergence of non-traditional security threats. The recent 13/11 Paris episode has led to severe political uncertainty in this region. What role the ISIS will play with reference to oil power game in the Central Asian region is very difficult to predict on account of its global network. Therefore, the countries have to adopt a more stringent guideline that would not only ensure the security and availability of their resources within the international spectrum, but also to keep their regional identity a stable one in the emerging global scenario.